*Loyalty Sites Take Their Lumps

No one said rewarding online consumers is easy. Two promotions sites recently discovered this the hard way.

Shopping Rewards programs at e-Rewards.com and AltaVista recently experienced severe glitches that inconvenienced thousands and angered at least one customer.

e-Rewards, one of the Web's only exclusive loyalty programs, depends on its sponsors -- Blockbuster, Compaq, Delta Air Lines, Hertz and Vail Resorts -- to e-mail customers asking them to join the program. These lists of consumers total more than 125 million consumers.

One sponsor, which the site refused to name, sent 200,000 e-mails when it was supposed to send only 100,000.

The good news for the site was that response was overwhelming. The bad news, however, was that the servers were not equipped to handle such traffic, and the site crashed.

One consumer who tried to sign up for the program last month was soured by his experience.

"I tried to sign up, and everything kind of froze. I think I had to shut down my browser," said Joseph Riser, a vice president at the GCI Group, a public relations firm based in New York.

This month, Riser received an e-mail offering him $5 to return and complete the enrollment process. It stated: "As you know, the unprecedented response to our enrollment invitations over the last few weeks stressed our system beyond its capacity. Last week, after we upgraded our systems, we invited you to come back and complete the enrollment process. Another unexpected and unfortunate technical error occurred and again negatively affected our system. We deeply regret our misuse of your time."

Riser was put off by the letter, considering the application takes more than 10 minutes to complete. In addition, the $5 incentive proved insulting, he said.

"Time is big money. If somebody stiffs you, you're not coming back," he said. "It's entirely too much hassle for what it's worth. Five dollars isn't going to buy me back. You get one shot with this e-commerce stuff. If it doesn't run really smoothly, you might as well shut your doors."

e-Rewards acknowledged the mishap and cited it as growing pains. The site launched in March and planned to roll out the program slowly to test its functionality.

"One sponsor dropped hundreds of thousands of e-mail all at once. We wanted to start out slower," said John Rothwell, senior vice president at e-Rewards, Dallas. "It put a burden on the system. We had to figure out how to deal with that. What happened shouldn't have happened, but it did and we all learned from it."

The site has increased the capacity of its servers by 50 percent. It also added a technology that allows a consumer, if disconnected, to jump back to the point of the enrollment process at which he was cut off.

The $5 offer was a goodwill gesture, and Rothwell thinks that those experienced with the Internet saw it that way. "Obviously, these things happen," he said. "I've been knocked off of AOL so many times, it's not funny. It's the nature of the Internet. We tried to be proactive [from] a customer service point of view by getting back to them quickly. We were trying to be up-front and let them know we're trying to help."

Select e-Rewards customers can earn a dollar credit redeemable for sponsors' products and services for receiving a message, reading the offer and providing feedback. Members can earn additional e-Rewards by providing profile information and completing surveys.

AltaVista, which launched its Shopping Rewards program in May, also hit a serious bump in the road during the Fourth of July weekend.

Because of a hole in its programming, a large number of consumers who were participating in a contest in conjunction with the rewards program were told they won $500 when, in fact, they had not won at all.

"It was a software glitch. It's one of the liabilities of being on the Internet as both a company and a consumer," said Jim Shissler, spokesman at the AltaVista Co., Palo Alto, CA. "We regret that it happened. We're covered legally in the disclaimer for technical problems, but as a show of good faith, we sent them something for their inconvenience even though [we] weren't obligated."

Anyone who participated in the program during the holiday weekend will receive 5,000 points, which equals $5.

The root of the problem was a glitch that served up a winning verification for users who repeatedly hit the refresh button on their browser. Once the programming error was discovered, people began posting information about the glitch on message boards. "Once that happened, traffic exploded," Shissler said. "It's most unfortunate for the usual players who came and thought they won."

Part of the CMGI network, AltaVista's loyalty program allows consumers to gain reward points not only for buying on the Web portal's Shopping.com service, but also for browsing.

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